One of the more legally and financially complex issues associated with marital property divisions is how to manage the issue of stock options in a Louisville divorce. Most assets and debts considered to be marital property are relatively easy to value and ultimately divide. The value of these assets, such as cars, collections, the family home, a closely-held business or professional practice, rental property, and even retirement accounts and pensions, is fairly straightforward. By their very nature, stock options cannot be sold to a third party and do not carry a “market value.” This can make the process of valuation and division quite challenging.
One of the first questions regarding stock options is whether they are “vested” or “unvested.” If a company has set aside shares for one of the soon-to-be former spouses, they often set conditions, such as length of employment or a period, before ownership of the stock will be transferred to the receiving party. These shares of stock are considered to be “unvested” until the conditions of eligibility or transfer have been completed. The term “vested” usually applies to stocks held by an employee that were initially granted through an Employee Stock Option (ESO) or Restricted Stock Units (RSU). A stock is vested when the offer is completed, earned, or gained by the recipient.
Dividing stock options in a Louisville divorce is usually accomplished based on a formula often called a “time rule.” There are two primary types of time formulas, which apply separately to those options based upon future performance or an incentive to stay, and those options used to attract an employee or investor or reward services already performed.
The Court will usually order or require an expert opinion regarding the circumstances surrounding how and why the stock option was granted, the date they are to be vested, the present or a reasonable valuation of the stock, as well as the date of hire and/or separation for the associated employee.
Unvested stock options, which are marital property, are still subject to division in a divorce. Dividing stock options in a Louisville divorce is a complex process requiring the experience and legal skill of the divorce and family law attorneys at Dodd & Dodd.
We invite you to review the strong recommendations of our former clients and the legal industry and contact Dodd & Dodd or call 502-584-1108 to schedule an appointment with one of our attorneys.
